HOUSTON, Dec. 9, 2013 /PRNewswire/ -- Cabot Oil & Gas Corporation (COG) today reported results from the Company's first 10-well pad in the Marcellus Shale. Additionally, the Company provided an update on its share repurchase program and announced the sale of legacy conventional Mid-Continent properties.
Cabot's First 10-Well Marcellus Pad
Cabot recently turned-in-line its first 10-well pad in the Marcellus, which included eight Lower Marcellus wells and two Upper Marcellus wells. The 10-well pad was completed with 170 fracture stimulation (frac) stages with a combined peak production rate of 201 million cubic feet (Mmcf) per day and a combined average 30-day production rate of 168 Mmcf per day. The production rates per 1,000' of lateral exceeded the Company's 14 Bcf type curve, further reiterating the consistency of results across Cabot's Marcellus position.
"This 10-well pad represents the new standard for operational efficiencies and technological advancement in our Marcellus operations," stated Dan O. Dinges, Chairman, President, and Chief Executive Officer. "From de-risking of the Upper Marcellus and downspacing initiatives in the Lower Marcellus to drilling and completion efficiencies and bi-fuel utilization in our operations, our achievements on this pad showcase the innovation and ingenuity our team continues to demonstrate day-in and day-out."
Highlights from the 10-well pad include:
Upper Marcellus De-Risking
Two Upper Marcellus wells were completed on the pad with a total of 37 frac stages with an initial production (IP) rate of 32 Mmcf per day and a 30-day production rate of 24 Mmcf per day. These wells were spaced 1,000' apart in the Upper Marcellus and were offset 500' by a Lower Marcellus well. "We continue to monitor these wells to evaluate the productivity of the Upper Marcellus; however, based on the results to date, we continue to believe that the Upper Marcellus across our acreage position will provide rates of return that rival or exceed most unconventional resource plays," explained Dinges.
500' Downspacing Pilot Program
The 10-well pad included a pilot program that tested 500' downspacing between three Lower Marcellus wells as compared to Cabot's current Lower Marcellus spacing of 1,000' between laterals. The three wells were completed with a total of 62 frac stages with an IP rate of 62 Mmcf per day and a 30-day production rate of 56 Mmcf per day. "While more production data and testing are needed to determine the optimal spacing of laterals across the play, the results from this pilot program reinforce our belief that tighter downspacing will increase recoverable resource across our position, further enhancing the value of our Marcellus asset," affirmed Dinges.
Drilling and Completion Efficiencies / Cost Savings
Cabot experienced significant efficiency gains in its drilling and completion operations on the pad, which resulted in approximately $6 million of cost savings for the 10-well pad. On the drilling side, Cabot reduced its drilling cost per foot on this pad by 30 percent compared to 2012 and 12 percent compared to the first half of 2013 as a result of location cost savings, reduced move time between wells and additional drilling efficiencies captured by pad drilling. On the completions side, Cabot completed 170 stages over a 27-day period, which included 15 days with over seven completed stages per day while twice achieving a new Company record of 9 completed stages in a 24-hour period. The average of 6.3 completed stages per crew day for this pad represents a 50 percent increase over the average for 2012 and a 24 percent increase over the average for the first half of 2013.
As a result of the drilling and completion efficiency gains on its first 10-well pad, Cabot anticipates well costs for the Company's typical 14 Bcf well will decrease from $6.4 million on a two-well pad to $5.8 million or less on a 10-well pad. "The savings on this pad highlight the impact of pad drilling on our cost structure moving forward and we expect to capture further savings as we move to larger, multi-well pads across our entire drilling program," asserted Dinges. "While we still have some needs to hold acreage in the near-term which limits our ability to move to complete pad drilling, approximately 60 percent of our 2014 program will be drilled on pads with five or more wells."
This 10-well pad is the Company's first location to have been hydraulically fractured by an entirely bi-fuel frac fleet. Cabot's frac service provider, Baker Hughes, utilized a fleet powered by bi-fuel engines via line gas from nearby producing Cabot wells. The use of a bi-fuel frac fleet on the pad resulted in substantial cost savings for Cabot, while reducing the Company's environmental footprint through the displacement of approximately 110,000 gallons of diesel with its own natural gas. "The bi-fuel operations on this pad represent the future for Cabot's drilling and completion activities in the Marcellus and we expect these initiatives to be implemented across our entire program over the next few years," said Dinges.
Share Repurchase Program
During the fourth quarter, the Company has repurchased approximately 4.8 million shares, representing 25 percent of the 19.2 million shares authorized under its current share repurchase program. The recent share repurchases will be funded by the proceeds from the Company's previously announced Marmaton and West Texas divestitures. "The recent share repurchases highlight our continued commitment to creating long-term value for our shareholders," stated Dinges. "We will remain opportunistic on this front with the material disconnect between market valuation and the Company's intrinsic value, while still maintaining the financial flexibility and liquidity needed to fund our operations."
Mid-Continent Asset Sale
In addition to the previously announced Marmaton and West Texas divestitures, Cabot recently entered into a purchase and sale agreement with an undisclosed buyer to sell certain legacy conventional oil and gas properties located in the Mid-Continent for approximately $123 million. Current production from these properties is approximately 15 Mmcfe per day (94% gas). This transaction is expected to close by year-end 2013, subject to customary closing conditions and adjustments. "To date we have announced approximately $325 million of non-core asset sales, with proceeds being reinvested into our higher-return projects through the drill-bit and through share repurchases at prices materially below our intrinsic value," explained Dinges.
Evercore acted as financial advisor to Cabot on this transaction.
Cabot Oil & Gas Corporation, headquartered in Houston, Texas is a leading independent natural gas producer, with its entire resource base located in the continental United States. For additional information, visit the Company's homepage at www.cabotog.com.
The statements regarding future financial performance and results and the other statements which are not historical facts contained in this release are forward-looking statements that involve risks and uncertainties, including, but not limited to, market factors, the market price (including regional basis differentials) of natural gas and oil, results of future drilling and marketing activity, future production and costs, and other factors detailed in the Company's Securities and Exchange Commission filings.
FOR MORE INFORMATION CONTACT
Matt Kerin (281) 589-4642
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